Income plays a significant role in determining who does or does not experience poverty, but it is not the only factor. Wealth (a person’s assets that build up over time, sometimes over generations, minus any debt) contributes enormously to financial stability and poverty prevention.  Income and wealth are two distinct but important factors at play in the 21^st century. An individual or family’s wealth, or lack thereof, can either help them to survive an economic crisis or cause a one-time difficulty to turn into lasting financial distress. It is crucial to understand, therefore, how wealth is distributed in our society today to fully grasp the reality of our 21^st century economic system.

There are two ways to obtain wealth: build wealth during one’s lifetime or inherit it. There are many factors that make it challenging for individuals and families to build wealth: low wages, rising housing costs, healthcare expenses, and more. Compared with these challenges, inherited wealth confers a significant advantage for individuals to get ahead in our society.

When you look at the numbers, the massive wealth gap in the United States is startling. Wealth is much more highly concentrated than income, and that concentration of wealth at the top has risen since the 1980s.¹ Today, the top 10% of the wealth distribution holds more than three-quarters of all wealth. This leaves the bottom 90% collectively owning just 23% of total U.S. wealth, a significant decline from 33.2% in 1989.² Not only do some individuals and families struggle to build wealth, but they also struggle with high levels of debt. The average debt for families in the bottom 10% of the wealth distribution was about $1,000 in 2016.³

The U.S. wealth gap has systematically kept people of color at the bottom and white individuals and families at the top end of the economic spectrum. The average wealth of white families ($919,000) is more than $700,000 higher than the average wealth of Black families ($140,000) and Hispanic families ($192,000).³ The insistence on tax cuts and trickle-down economics beginning in the 1980s has not only failed to reduce wealth inequality, but has actually exacerbated the inequity. If we are serious about ending about poverty in the 21^st century, we must take steps to distribute wealth more evenly and minimize barriers to building wealth.

Much of the debate on wealth and assets revolves around taxes, and the December 2017 tax bill once again preferenced the wealthiest individuals and corporations over everyone else. When the wealthiest in our nation rely on assets as their main source of financial security, they are structuring their economic well-being in a way that lowers their tax rate. This is how people like Warren Buffett are able to pay lower tax rates than his secretary.⁴ As people of faith, we believe that everyone must pay their fair share. Taxes are both the price we pay for public benefits that serve the common good, and we are mindful of the way our tax code can be structured to provide some economic relief to people struggling with the ability to build wealth.

Reflecting on Financial Security and Assets

Shannon Hughes, Senior Assistant Director for service, justice and immersion at Xavier University’s Dorothy Day’s Center for Faith and Justice, reflects.

A Personal Story about Financial Security and Assets

“With a family of seven, it’s a pretty big task to come up with enough money to find a place to live, put a down payment, pay insurance, and get everything in order. That was pretty much what I planned on doing, but the only time I knew I would have enough money was when my tax return would come back. The refund from the Earned Income Tax Credit and Child Tax Credit was a big part of helping me survive through that time…”

Read Christine’s full story here.

Facts and Figures

• The top 10% of the wealth distribution held 78% of all wealth 2016.²
• 53% of young adults aged 18-29 with a bachelor’s degree or more education have outstanding student debt in 2016.⁵
• In 2016, 42% of families headed by Black adults ages 25 to 55 had student loan debt, compared to 34% of similar white families.³
• About two-thirds of homeownership tax subsidies and retirement subsidies go to the top 20% of taxpayers, as measured by income. The bottom 20%, meanwhile, receive less than 1% of these subsidies.³
• In 2016, white family wealth was seven times greater than Black family wealth and five times greater than Hispanic family wealth.³

Words of Wisdom

-Pope Francis

-President Franklin Delano Roosevelt

We Pray

Reflection Questions

Additional Resources